What Is Open Interest?

Understanding Open Interest

Open interest (OI) is the total number of outstanding derivative contracts - such as perpetual futures - that have not been settled or closed. Every open position in the market contributes to open interest. When a new buyer and a new seller enter a trade, open interest increases by one contract. When an existing long closes against an existing short, open interest decreases by one contract.

Open interest is typically expressed in either the number of contracts or in dollar value. For example, if BTC perpetual futures on Hyperliquid have an open interest of $500 million, that means there are $500 million worth of positions currently active in the market. Half of that is held by longs and half by shorts, since every futures contract requires both a buyer and a seller.

Open interest is one of the three core metrics - alongside price and volume - that traders use to analyze market conditions. While price tells you where the market is and volume tells you how active it has been, open interest tells you how much capital is committed to current positions. You can view OI data for all Hyperliquid markets on the markets page.

Open Interest vs. Trading Volume

Open interest and trading volume are frequently confused, but they measure fundamentally different things. Trading volume counts the total number of contracts that changed hands during a given period. Every time a trade is executed, it adds to the volume count regardless of whether it opens a new position or closes an existing one.

Open interest, by contrast, only changes when the total number of outstanding contracts changes. Consider three scenarios: if a new buyer matches with a new seller, both volume and open interest increase. If an existing long closes by selling to a new short, volume increases but open interest stays the same (one position closed, one opened). If an existing long closes against an existing short covering, volume increases but open interest decreases.

This distinction matters because high volume alone does not tell you whether money is flowing into or out of a market. High volume with rising open interest means new capital is entering. High volume with falling open interest means existing positions are being unwound. The combination of these metrics provides a much richer picture of market dynamics than either one alone.

Interpreting OI Changes with Price

The most powerful way to use open interest is to analyze it alongside price movements. There are four key combinations that traders watch. First, rising price with rising OI is the strongest bullish signal. It means new money is entering the market via new long positions, and these longs are profiting as price increases. This combination confirms an uptrend and suggests continuation.

Second, rising price with falling OI suggests the rally is driven by short covering rather than new buying. Shorts are closing their positions at a loss, which pushes price up, but no new capital is entering. This type of rally is often weaker and more likely to reverse once the short covering is complete.

Third, falling price with rising OI is a strongly bearish signal. New short positions are being opened, driving the price down. The increase in OI confirms that fresh capital is betting against the asset. Fourth, falling price with falling OI indicates that longs are capitulating and closing their positions. While the price is declining, the selling pressure is coming from position unwinding rather than aggressive new shorting, making this the least bearish of the declining price scenarios.

These four patterns provide a framework for understanding whether a price move is driven by conviction (new positions) or exhaustion (closing positions). Seasoned traders check OI changes before making decisions to confirm or question the validity of price trends.

Using Open Interest in Trading Decisions

Beyond trend confirmation, open interest provides several actionable insights. When OI reaches historically high levels relative to a particular asset, it often signals that the market is heavily positioned and vulnerable to a sharp unwind. Extremely high OI means many traders have open leveraged positions, and a price move in either direction could trigger cascading liquidations.

Traders can also use OI to identify support and resistance levels. Large concentrations of open interest at specific price levels suggest that many positions were opened there. These levels often act as magnets or barriers for price, because traders will defend their positions at these prices or be forced out when they are breached.

For risk management, monitoring OI helps you gauge how crowded a trade is. If you are considering entering a long position but OI is at record highs with an extreme long/short ratio, you know the trade is crowded and the risk of a long squeeze is elevated. This information can help you adjust your position size, set tighter stop-losses, or wait for a better entry.

Open Interest Data on Hyperliquid

Hyperliquid provides transparent, on-chain open interest data for every listed perpetual futures market. Because Hyperliquid operates as a fully on-chain order book DEX, all open interest data is verifiable and accurate - unlike centralized exchanges where OI figures may be opaque or delayed.

Beacon aggregates and displays this data in an easy-to-read format on the markets page. For each asset, you can see the current open interest in dollar terms, along with price, 24-hour volume, and funding rates. This allows you to quickly scan across all markets to identify where capital is concentrated and where trading opportunities may exist.

Monitoring OI alongside funding rates is particularly powerful. When both OI and funding rates are elevated, it suggests extreme positioning that often precedes a correction. When OI is rising but funding rates remain moderate, it suggests balanced interest from both longs and shorts - a healthier market condition. Learn more about how perpetual futures work to fully understand these dynamics.